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Test your basic knowledge |
AP Microeconomics
Start Test
Study First
Subjects
:
economics
,
ap
Instructions:
Answer 50 questions in 15 minutes.
If you are not ready to take this test, you can
study here
.
Match each statement with the correct term.
Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.
This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. A very diverse market structure characterized by a small number of interdependent large firms - producing a standardized or differentiated product in a market with a barrier to entry
Cross-Price Elasticity of Demand
Monopsonist
Total Revenue
Oligopoly
2. Ei = (%dQd good X)/(%d Income)
Monopolistic competition
Least-Cost Rule
Income Elasticity
Productive Efficiency
3. Occurs when LRAC is constant over a variety of plant sizes
Perfectly elastic
Marginal Resource Cost (MRC)
Marginal tax rate
Constant Returns to Scale
4. The combination of labor and capital that minimizes total costs for a given production rate. Hire L and K so that MPL / PL = MPK / PK or MPL/MPK = PL/PK
Inferior Goods
Least-Cost Rule
Economic Growth
Cartel
5. The output where ATC is minimized and economic profit is zero
Break-even Point
Determinants of elasticity
Market Equilibrium
Price inelastic demand
6. The change in quantity demanded resulting from a change in the price of one good relative to other goods
Necessity
Break-even Point
Marginal Analysis
Substitution Effect
7. Exists if a producer can produce a good at lower opportunity cost than all other producers
Comparative Advantage
Productive Efficiency
Allocative Efficiency
Law of Increasing Costs
8. A group of firms that agree not to compete with each other on the basis of price - production - or other competitive dimensions. Cartel members operate as a monopolist to maximize their joint profits
Cartel
Total Product of Labor (TPL)
Marginal Benefit (MB)
Perfect competition
9. Pmc < MR = MC and Pmc > minimum ATC so outcome is not efficient - but profit = 0.
Total Revenue
Monopolistic competition long-run equilibrium
Diseconomies of Scale
Absolute prices
10. The change in quantity demanded that results from a change in the consumer's purchasing power (or real income)
Average Total Cost (ATC)
Marginal Productivity Theory
Perfectly elastic
Income Effect
11. The least competitive market structure - characterized by a single producer - with no close substitutes - barriers to entry - and price making power
Determinants of Demand
Monopoly
Least-Cost Rule
Productive Efficiency
12. Pm > MR = MC - which is not allocatively efficient and dead weight loss exists. Pm > ATC - which is not productively efficient. Profit > 0 so consumer surplus is transferred to the monopolist as profit
Monopoly long-run equilibrium
Constant Returns to Scale
Market power
Resources
13. Ed = 1
Luxury
Unit elastic demand
Monopoly
Collusive oligopoly
14. Occurs when an economy's production possibilities increase. This can be a result of more resources - better resources - or improvements in technology.
Non-collusive oligopoly
Comparative Advantage
Total Welfare
Economic Growth
15. Ed < 1
Marginal Cost (MC)
Income Effect
Price inelastic demand
Producer surplus
16. Models where firms agree to mutually improve their situation
Income Elasticity
Collusive oligopoly
Determinants of Supply
Cartel
17. The upward part of the LRAC curve where LRAC rises as plant size increases. This is usually the result of the increased difficulty of managing larger firms - which results in lost efficiency and rising per unit costs.
Dead Weight Loss
Least-Cost Rule
Diseconomies of Scale
Average Total Cost (ATC)
18. A per unit tax on production results in a vertical shift in the supply curve by the amount of the tax
Excise Tax
Perfect competition
Public goods
Excess Capacity
19. When firms focus their resources on production of goods for which they have comparative advantage
Market Economy (Capitalism)
Least-Cost Rule
Specialization
Price floor
20. Ed > 1 - meaning consumers are price sensitive
Average Variable Cost (AVC)
Profit Maximizing Resource Employment
Market power
Price elastic demand
21. AVC = TVC/Q
Average Variable Cost (AVC)
Economics
Constant cost industry
Economic Growth
22. Total product divided by labor employed. APL = TPL/L
Constant cost industry
Average Product of Labor (APL)
Monopolistic competition
Economies of Scale
23. The lost net benefit to society caused by a movement away from the competitive market equilibrium
Perfectly elastic
Dead Weight Loss
Normal Goods
Total Welfare
24. Ed = 0 - no response to price change
Determinants of Supply
Complementary Goods
Perfectly inelastic
Law of Supply
25. Total revenue rises with a price increase if demand is price inelastic and falls with a price increase if demand is price elastic
Total Fixed Costs (TFC)
Total Revenue Test
Average Total Cost (ATC)
Marginal Benefit (MB)
26. AFC = TFC/Q
Average Fixed Cost (AFC)
Price elasticity
Resources
Price Ceiling
27. Another way of saying that firms are earning zero economic profits or a fair rate of return on invested resources
Price elastic demand
Normal Profit
Subsidy
Total Revenue Test
28. MUx / Px = MUy/Py or MUx/MUy = Px/Py
Utility Maximizing Rule
Determinants of Demand
Law of Diminishing Marginal Utility
Economies of Scale
29. Models where firms are competitive rivals seeking to gain at the expense of their rivals
Producer surplus
Price Elasticity of Supply
Non-collusive oligopoly
Accounting Profit
30. For one good - constrained by prices and income - a consumer stops consuming a good when the price paid for the next unit is equal to the marginal benefit received
Price Ceiling
Marginal Benefit (MB)
Constrained Utility Maximization
Income Elasticity
31. The additional benefit received from the consumption of the next unit of a good or service
Price floor
Short run
Excise Tax
Marginal Benefit (MB)
32. The philosophy that a citizen should receive a share of economic resources proportional to the marginal revenue product of his or her productivity
Marginal Revenue Product (MRP)
Marginal Productivity Theory
Private goods
Subsidy
33. A period of time long enough to alter the plant size. New firms can enter the industry and existing firms can liquidate and exit
Dead Weight Loss
Long Run
Price elastic demand
Unit elastic demand
34. Exists when the production of a good creates utility for third parties not directly involved in the consumption of production of the good
Absolute Advantage
Positive externality
Private goods
Perfectly competitive long-run equilibrium
35. All firms maximize profit by producing where MR = MC
Profit Maximizing Rule
Monopolistic competition
Surplus
Monopolistic competition long-run equilibrium
36. Ed = (%dQd)/(%dP). Ignore negative sign
Long Run
Average Variable Cost (AVC)
Price Elasticity of Supply
Price elasticity
37. A legal minimum price below which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent surplus
Price floor
Inferior Goods
Variable inputs
Scarcity
38. Two goods are consumer complements if they provide more utility when consumed together than when consumed separately
Complementary Goods
Increasing Cost Industry
Price elasticity
Resources
39. Production of the combination of goods and services that provides the most net benefit to society. The optimal quantity of a good is achieved when the MB = MC of the next unit and only occurs at one point on the PPF
Law of Demand
Average Product of Labor (APL)
Allocative Efficiency
Excess Capacity
40. Demand for a resource like labor is derived from the demand for the goods produced by the resource
Cross-Price Elasticity of Demand
Total Revenue Test
Derived Demand
Perfectly inelastic
41. Exists when the production of a good imposes disutility upon third parties not directly involved in the consumption or production of the good
Negative externality
Relative Prices
Market Equilibrium
Income Elasticity
42. The marginal utility from consumption of more and more of that item falls over time
Total Fixed Costs (TFC)
Opportunity Cost
Consumer surplus
Law of Diminishing Marginal Utility
43. A period of time too short to change the size of the plant - but many other - more variable resources can be changed to meet demand
Inferior Goods
Marginal Revenue Product (MRP)
Shutdown Point
Short run
44. ATC = TC/Q = AFC + AVC
Average Total Cost (ATC)
Diseconomies of Scale
Determinants of Demand
Marginal Analysis
45. The rate paid on the last dollar earned. This is found by taking the ratio of the change in taxes divided by the change in income
Determinants of Labor Demand
Total Product of Labor (TPL)
Marginal tax rate
Least-Cost Rule
46. Entry of new firms shifts the cost curves for all firms downward
Decreasing Cost industry
Complementary Goods
Economies of Scale
Diseconomies of Scale
47. The mechanism for combining production resources - with existing technology - into finished goods and services
Long Run
Opportunity Cost
Production function
Marginal Revenue Product (MRP)
48. A market structure characterized by a few small firms producing a differentiated product with easy entry into the market
Law of Diminishing Marginal Utility
Short run
Monopolistic competition
Explicit costs
49. The case where economies of scale are so extensive that it is less costly for one firm to supply the entire range of demand
Marginal Analysis
Natural Monopoly
Price floor
Absolute Advantage
50. The proportion of the tax paid by the consumers in the form of a higher price for the taxed good is greater if demand for the good is inelastic and supply is elastic
Marginal Product of Labor (MPL)
Scarcity
Average Fixed Cost (AFC)
Incidence of Tax